ANN ARBOR, MI - The Ann Arbor City Council meets this week to try to figure out next steps for the vacant downtown Y Lot.

Before voting on two resolutions to try to repurchase the property from Dennis Dahlmann and to issue bonds to do that, the council is now expected to take up a new resolution sponsored by Council Member Zachary Ackerman and Mayor Christopher Taylor.

Their resolution, if approved by council, would lay out the city's intentions for the 0.8-acre property along William Street where the downtown YMCA and 100 units of affordable housing once stood until the city had the site demolished a decade ago.

The newly proposed resolution, which Ackerman last week announced his intentions to bring forward, states that the city would use the Y Lot to create the "greatest quantity and quality of affordable and workforce housing units in downtown Ann Arbor."

"Housing located near centers of employment and public transit decreases traffic congestion and promotes economic activity, both of which enhance residents' quality of life," the resolution states.

"Within the last five years, the city has had tremendous success utilizing public-private partnerships to construct, operate and maintain thousands of affordable housing units," the resolution states, referring to investments the city has made to renovate and rebuild existing affordable housing units through the Housing Commission.

The resolution cites statistics indicating the income gap in the Ann Arbor metro area, which includes all of Washtenaw County, has grown about 33 percent in the last four decades, widening the divide between the area's wealthiest and poorest residents.

The City Council voted 10-1 in 2015 to adopt a new set of affordable housing goals, making a commitment to work with other partners toward creating nearly 2,800 new affordably priced rental units in the city by 2035. The new Y Lot resolution put forward by Ackerman and Taylor seeks to pick up the pace on working toward that goal.

"Since adopting this goal, the city has only netted 18 new affordable housing units," the resolution states, arguing economic diversity is pivotal to the vibrancy of the community, the health of the economy, and the success of downtown businesses.

The resolution lays out a timeline for working toward the goal of affordable housing on the Y Lot if the city regains possession, stipulating that by Aug. 31 the city administrator must recommend to council a process with the following requirements:

The city would maintain some ownership of the property (e.g. land lease)

The city would seek to recapture the cost of exercising its rights in the property while ensuring a sustainable financial model

The developer would offer a mix of unit types and rent levels

The developer would maximize the number of affordable and workforce housing units with a maximum of 150 percent of fair market rent as defined by the U.S. Department of Housing and Urban Development

The developer would accept Housing Choice Vouchers

The developer would dedicate 50% of the ground floor to active and/or public uses

"The city may explore options with interested users to dedicate the ground level and levels immediately above and below for public use purposes and partner with a developer to incorporate these uses," the resolution further states.

If the city failed to reach an agreement to create a project that includes affordable housing within 48 months, then the previously outlined goals in the paragraphs above would expire, the resolution states.

And if the property was then redeveloped under current zoning without restrictions, the resolution states the city would dedicate a minimum of 50 percent of all future proceeds from the sale or lease of the land to the city's affordable housing fund.

The city already put about $1.4 million into its affordable housing fund after selling the lot to Dahlmann for $5.25 million in 2014.

The Y Lot is the vacant lot next to the Blake Transit Center along William Street, across from the downtown library.

The city sold the lot to Dahlmann for a redevelopment that never happened, and the City Council is now considering exercising what the city believes is its right to buy it back for $4.2 million because Dahlmann didn't develop it. Dahlmann blames the city for the lack of a project happening on the Y Lot by now.

Dahlmann is suing the city to keep it, though he has offered to drop his lawsuit and return the property to the city for $5.7 million. Or, alternatively, he has offered to pay the city $1.5 million to let him keep the property without any special restrictions.

City officials have been citing market values from an August 2017 appraisal report ranging from $7.7 million to $12.5 million to support the argument that the lot is worth buying back.

If the city really thinks it's worth nearly $10 million, as city officials have suggested, Dahlmann is giving the city an option to buy it for $5.7 million and avoid litigation that could drag on for years.

The appraisal the city had done last August shows a range of market values for the property that vary depending on the size of building that could be built, with $7.7 million being the market value if a 191,664-square-foot building could be built, $8.4 million at 209,0880 square feet, $9.8 million at 243,936 square feet, $11.2 million at 278,784 square feet, and $12.5 million at 313,632 square feet.

Based on that appraisal, a majority of council members believe the property is worth about $9.8 million now, assuming it could be resold for a development with a floor-area ratio of 700 percent.

Dahlmann had his own appraisal done last August by a different appraiser, indicating a market value of $6.1 million.

Tom Wieder, the attorney representing Dahlmann in his lawsuit against the city, argues the city does not have the right to repurchase the property for $4.2 million at this point.

The warranty deed that conveyed the city property to Dahlmann for $5.25 million was dated April 2, 2014.

The deal stipulated that Dahlmann had four years to build a mixed-use project as he described and get a certificate of occupancy or else the "right of reversion" would kick in, with the property reverting to the city for the lesser of $4.2 million or the appraised value.

Since the city didn't pay by April 2, Wieder argues, the city lost its "reverter" rights.

When buying the property four years ago, Dahlmann agreed to redevelop the site within four years and build a new mixed-use building rising at least five stories, with ground-floor retail/restaurant space, and office space and apartments above.

The project also was to include a landscaped open space, including a grand fountain that Dahlmann described in his plans.

Council Member Jane Lumm, an independent from the 2nd Ward, was absent earlier this month when the council was split 7-3 on whether to try to repurchase the lot for $4.2 million. It needs eight votes.